The term 'psyche' has been adopted into Middle Way philosophy from Jungian psychoanalysis, together with the term ego. However, its use has been adapted from this source, and it should not be assumed that the meaning is the same as in Jung or Freud.

The concept of the psyche can only really be understood in relation to that of the ego. The ego is our current set of identifications - the things we happen to want now. However, if we take a broader view of ourselves and apply a wider awareness, we can recognise that our desires are subject to change, and other desires emerge at other times. An obvious example of this would be a smoker who wants to give up, but oscillates between being dominated by a desire to give up and being dominated by a desire to smoke. In a sense, even when the smoker is not immediately conscious of a desire to give up, it is still there in the background. This wider view of ourselves including the 'background' is the psyche.

In my view one mistake made by Freud and Jung is to identify the rest of the psyche apart from the ego as 'unconscious'. However, this is not really relevant, as the rest of the psyche may or may not be unconscious. The smoker may actually remember the resolution to give up smoking, but still identify more with the desire to smoke. Our identification with a desire, meaning or belief is what makes it egoistic, not whether or not it is conscious. The psyche consists in all our actual and potential desires, meanings and beliefs, whether they happen to be egoistically identified with at the moment or not, and whether or not they happen to be conscious at the moment. Careful attention to our mental states over a period of time (as can be practised in meditation) can make it clear in experience that we are multi-faceted, shifting creatures and that the current identifications of the ego are only the tip of the iceberg.

If we start to see ourselves not as egos, but as psyches, the implications are revolutionary. It will show that the picture of the world represented to us by the ego at any one point is a contingent one, subject to correction by realisations associated with other areas of the psyche. This means that the degree of integration of the ego with other parts of the psyche gives us a basis for objectivity. This also means that all justification is provisional. The assertions of metaphysics, beyond all possible examination under experience, appear to be merely the assertions of the ego that can only be asserted dogmatically. All assertions will need to be incrementally justified because they are only based on the picture created by the ego at the moment. Even our understanding of meaning will need to be changed: it is not just a representation of a state of affairs, but a whole emotional and physical relationship of ourselves to a symbol, because we will become concerned not just with the way the ego finds things meaningful in its current conceptions, but also with the response of the whole psyche.